Thursday, January 22, 2015

RPS Repeal Efforts Are Fueled by False Claims

By Nick Lawton, Staff Attorney

Efforts to repeal Renewable Portfolio Standards (RPSs) are underway in several states. In Kansas, where the legislature voted down two separate RPS repeal measures in 2013, the addition of five Republicans to the legislature has reinvigorated the RPS repeal effort. The West Virginia legislature is also considering a repeal of its RPS—even though West Virginia’s law does not actually require renewable energy development, instead allowing compliance through “alternative energy resources” including coal and natural gas. In Colorado, two bills have been proposed to either reduce the required amount of renewable energy development or to push back compliance deadlines. In North Carolina, repealing the RPS is the first item on Americans for Prosperity’s (a very conservative advocacy organization funded by the Koch brothers) legislative agenda for 2015. And finally in Connecticut, a report by the Yankee Institute, a conservative think tank, argues for repeal of the state’s RPS.

The repeal efforts in various states are all based on a common strain of misinformation. Calls for repeal frequently repeat the assertion that RPSs cost states money and jobs. For example, the Yankee Institute claims that Connecticut’s RPS adds roughly $1.6 billion to the state’s electricity prices over the next five years, costing each resident roughly $450. That same study also claims that the RPS will cost the state 2,660 jobs and $283 million in lost income during the same period. Opponents of Kansas’s RPS play the same tune, claiming that the RPS will lead to increases in electricity rates. The Colorado lawmaker leading the charge against that state’s RPS, Republican Senator Ray Scott, makes essentially the same argument that the policy has burdened consumers with higher energy bills.

However, the argument that Renewable Portfolio Standards raise rates, as compared with the business-as-usual course of reliance on fossil fuels, is simply—and demonstrably—wrong. For example, the U.S. Energy Information Administration (EIA) reports that the average residential electricity price increased by 3.2% between 2013 and 2014. More specifically, in the Southeast, where every state except South Carolina lacks an RPS, average prices rose by 3.1% in the same period. Meanwhile, an empirical study by Lawrence Berkeley National Laboratory has revealed that Renewable Portfolio Standards in deregulated states have increased electricity rates by 2% or less (except in Massachusetts, which saw a roughly 2.5% increase), while RPSs in regulated states have increased rates by roughly 3% or less. In short, electricity rates have not increased more quickly in states with Renewable Portfolio Standards.

In fact, reliance on fossil fuels seems to be the primary driver for electricity rate increases. EIA reports that states in New England that saw an 11.8% increase in electricity prices can attribute those rate increases not to RPSs, but to volatility in the price of natural gas as a result of high energy demand in a cold winter. Similarly, as of 2012, Kansas’s RPS had increased electricity rates by less than 1%, but a single rate increase to pay for a single environmental upgrade to a coal-fired power plant would have raised rates by 2.3%, more than twice as much.

A similar pattern of debunking is easy to provide for the claims that RPSs kill jobs. For example, the Montana Department of Commerce reported in 2013 that wind energy development in that state had provided $1.5 billion in capital investment and had yielded nearly 20,000 jobs—more than the Keystone XL pipeline. Similarly, there are now twice as many workers nationwide in the solar industry than in coal mines.

Oregon provides the clearest example of the disparity between the claims about RPSs and the truth about RPSs. In 2011, the Beacon Hill Institute & Cascade Policy Institute released a report entitled “Economic Impact of Oregon’s Renewable Portfolio Standard.” That report projected that Oregon’s RPS would cost the state $992 million in 2025, would raise electricity rates by 24%, and would lead to the loss of 24,630 jobs. In fact, none of these predictions have come to pass. In reality, Oregon added 3,067 renewable energy jobs in the second quarter of 2013. More dramatically, LBNL reports that compliance with the RPS has actually saved money: “In Oregon, average utility estimates of incremental compliance costs were actually slightly negative (-$4/MWh); that is, RPS resources were determined to cost less, on a statewide average basis, than the proxy non-renewable resources that would have otherwise been procured.” In short, Oregon’s RPS is actually saving the state money while creating jobs and providing carbon-free energy.

RPS opponents seem to remain blinkered to the fact that Renewable Portfolio Standards work, instead making demonstrably false claims about these policies while refusing to inquire into their actual effects. Republicans in the West Virginia legislature are epitomizing this head-in-the-sand approach to policy-making, opposing economic analysis of the proposed RPS repeal—despite the fact that a local utility believes it could comply with the RPS without increased costs or job losses.

My personal favorite flavor of RPS-related misinformation comes from Colorado. In that state, average electricity rates are well below the national average, but state Senator Ray Scott still claims the RPS is harming ratepayers. Scott laments that the state’s RPS “is being paid for by the ratepayers, not the utilities.” He continues: “And, quite frankly, if it’s such a great idea, the companies should build these systems. It shouldn’t be done on the backs of the ratepayers.” This claim sounds like a populist objection to high electricity prices, but is in fact meaningless. Utilities make money by recovering costs from ratepayers. Thus, utility investments—whether made to comply with an RPS or not—are ultimately paid for by ratepayers. Senator Scott’s objection ignores this fundamental principal of energy markets in an attempt to score political points with a lofty-sounding but vapid sound bite. No one should be fooled.

Renewable Portfolio Standards are good energy policy. They work; the vast majority of states are on track to meet RPS goals. They do not raise electricity rates more than business as usual. They create jobs. And they help transition the nation to a carbon-free energy economy. Claims to the contrary are simply and demonstrably wrong. Hopefully, the latest efforts to repeal RPSs will face the same failure as they did last year.

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